Analysis of fundamental value creation through acquisitions in the U.S. oil and gas industry

Abstract

Description of the goal, tasks and main results Goal: to analyze the fundamental value creation through the acquisitions in oil and gas industry in the United States. The key objectives of the research are: Identification and estimation of the residual earnings model for the oil and gas industry in the United States; Estimation of the oil and gas fundamental index in the United States; Estimation and analysis of the fundamental value creation of the acquisition deals in the long run for the acquirers using the calendar-time portfolio approach. Key results: there is no excess fundamental value creation for the acquirer in the U.S. oil and gas industry through the large related non-equity financed acquisition but at the same time there is no evidence of the value destruction. The precedent is established in the analysis of long-term performance: the calendar-time portfolio returns are calculated with the help of the fundamental value. In addition, the parameters for the two-factor residual earnings model for 1970-2012 period for the U.S. oil and gas companies are estimated: can be used for the calculation of fundamental value.